The Role of the CEO

Rarely am I asked by budding entrepreneurs what their role should be in the company.  It seems all too often entrepreneurs feel they know what their role is and don’t ask.  This is usually a bad sign and is dangerous for their own career…especially in a venture backed company. 

My favorite entrepreneurs are those who ask questions about ideas and where they should focus their time.  I try to explain how and why communication and trust are paramount to their success and recently Robert Hacker of Sophisticated Finance posted on this very subject.  With his permission, his post is reprinted here…

The Equity Kicker has a good post “Founder Transitions” which includes a description of what this VC looks for in terms of skills in a CEO. Setting aside the necessary abilities of vision and strategic thinking, the skills are:

1. the ability to communicate effectively (especially in difficult situations)
2. the ability to consider their people and human issues as a priority
3. the ability to earn the trust and respect of their employees (leadership)

(Note: this is a very good list of CEO skills regardless of company size)

In my experience start up and early stage CEOs fail most frequently on #2, where staff are oppressed to make up for CEO errors. Of course, once you stop looking out for your employees you lose their respect–#3, at which time everybody focuses on just keeping their job and the CEO alone bears all responsibility for everything.

The post also talks about the other big failing of CEOs, their inability to put the company first. If you have outside shareholders (not debt holders), the legal responsibility of the CEO is to act in the best interest of all shareholders and thereby act in the best interest of the company. Many founders encounter difficulties when their personal interests and the best interests of the company diverge. Legally and morally the CEO must put the company ahead of his self-interest. If you can not do this, best not to take in outside investors such as VCs.